BUILDING BRANDS THAT PEOPLE LOVE A.G. BARR P.L.C. INTERIM REPORT JULY 2015

Transcription

1 BUILDING BRANDS THAT PEOPLE LOVE A.G. BARR P.L.C. INTERIM REPORT JULY

2 Interim Statement 02 Consolidated Condensed Income Statement 06 Consolidated Condensed Statement of Comprehensive Income 08 Consolidated Condensed Statement of Changes in Equity 09 Consolidated Condensed Statement of Financial Position 12 Consolidated Condensed Cash Flow Statement 13 Notes to the Financial Statements 14 Statement of Directors Responsibilities 30 Independent Review Report to A.G. BARR p.l.c. 31

3 WE ARE A BRANDED SOFT DRINKS BUSINESS MAKING, MARKETING AND SELLING SOME OF THE U.K. S BEST LOVED SOFT DRINKS BRANDS BUILDING OUR BRANDS ACROSS THE U.K. 03 Head Office 01 Cumbernauld Sales and Administration Offices 01 Cumbernauld 04 Middlebrook 10 Camden Sales Branches 03 Newcastle 05 Moston 06 Sheffield 07 Wednesbury 08 Walthamstow Supply Chain Sites 01 Cumbernauld 02 Forfar 09 Milton Keynes Turnover 130.3m Profit before tax (pre-exceptional items) 16.9m Free cash flow 7.4m Interim dividend 8% increase 01 A.G. BARR p.l.c. Interim Report

4 Interim Statement John R. Nicolson & Roger White A.G. BARR has been through an extremely demanding in which we have delivered a substantial level of change and business improvement. The period began with the closure of the Tredegar factory and the subsequent successful clearance and sale of the site which completed in September. During the early part of the year we also commissioned carton packaging capability at our Milton Keynes site, increasing capacity and improving flexibility in this important product format. The acquisition of the Funkin cocktail mixer business also completed in the period and we are pleased to report the business is meeting our high expectations. Alongside all of these highly visible actions and activities we have completed the planning and go-live of our Business Process Redesign (BPR) project which means we are now operating our business on a much more effective, modern and robust system and business process platform, capable of supporting sustained future growth. As we reported in July, the go-live of our BPR project, despite our significant efforts to reduce executional risk, proved to be more challenging than anticipated. We experienced a period of difficult internal operating conditions post go-live which undoubtedly impacted our revenue performance and our customer service. We have now stabilised our systems and our focus is to realise the business benefits our new improved operating platform offers. ROGER WHITE, CHIEF EXECUTIVEA. JOHN R. NICOLSON, CHAIRMAN... OUR BUSINESS IS WELL PLACED AND WE REMAIN CONFIDENT IN DELIVERING FURTHER ON OUR GROWTH POTENTIAL AND CONTINUING TO GENERATE LONG-TERM SHAREHOLDER VALUE. TRADING The soft drinks market in the period has been impacted by continued price deflation and very poor weather, especially in the north of the UK. As expected, our relative revenue performance has also been affected by the stretching prior year comparatives driven by better than average weather, strong execution behind the Glasgow 2014 Commonwealth Games and specific brand promotional phasing changes in the current year. A.G. BARR p.l.c. Interim Report 02

5 Interim Statement Total revenue for the period was 130.3m. Adjusting for the impact of discontinued business, turnover from ongoing business, including the recently acquired Funkin Limited ( Funkin ), declined 2.8%. The total soft drinks market, as measured by Nielsen, experienced a 0.6% decline in revenue during the period, with modest growth of 1.4% in volume driven by strong performance in water and the continued positive performance of the energy drinks category. We announced in late August a 5m investment at our Cumbernauld factory with the installation of new, high-speed glass filling capability. The investment will lead to the discontinuation of our returnable glass bottle system at the end of. However moving to non returnable, recyclable glass will support the long-term development of this popular product format. The investment will also facilitate a number of exciting brand development projects in We have maintained our long-term strategy of investing behind our core brands with further significant marketing activity. The prior year s activity was weighted to the first half in support of the Glasgow 2014 Commonwealth Games. This year s marketing programme sees a return to more normal phasing with greater proportionate activity later in the year. In the period we have continued to see gross margin improvement benefiting from a combination of improved procurement conditions and further delivery of supply chain savings. Operating margins have been adversely impacted by a combination of lower volumes and our commitment to maintaining brand and business investment. Adjusted* profit increased by 3.3% to 17.8m. Statutory profit before tax and exceptional items in the period was 16.9m. In the period we have continued to support the long-term growth of IRN-BRU, developing the brand across the UK as a whole, with national TV and digital advertising and the development of an exciting sponsorship plan with both the English Football League and the Scottish Professional Football League. The IRN-BRU brand continues to feature heavily in social media and digital channels, with positive consumer engagement during both our Tartan Packs promotion and our Bru Planet summer initiative. Acquisition of Funkin Limited In February we acquired Funkin Limited, enhancing and diversifying our portfolio by taking our business into the new and growing cocktail solutions market, providing premium fruit purées, cocktail mixers and syrups. With continued strong growth, along with an exciting innovation programme, bringing unique and new premium products to the market, the Funkin brand is already delivering against our high expectations. With Funkin s market leading position in the UK, and its growing international presence in the US and Europe, this move into cocktail mixers offers exciting opportunities to build even further on the continuing success of the Funkin brand. 03 A.G. BARR p.l.c. Interim Report

6 Interim Statement In the period, we also announced phase 3 of the ongoing investment at our Milton Keynes site. Our plans include the building of increased warehouse capacity to improve operational efficiency, flexibility and costs, as well as the purchase of 4 acres of development land adjacent to the site. The total expected cost of this development phase, including the additional land for future expansion, is 11m. Our actions to drive efficiency, as well as our continued investment in our asset base and brands, indicate our commitment to building a platform which will effectively support significant future growth across our whole business. In the period we had no exceptional charges (2014: 2.5m). BALANCE SHEET Our balance sheet remains strong. Intangible asset additions of 27.7m reflect the brand and goodwill valuation associated with the Funkin acquisition and the capitalisation of the investment in our BPR Project. We also continue to invest in our tangible asset base. Cash capital expenditure during the period amounted to 7.9m, a combination of normal operational replacement and the acquisition of additional land at our Milton Keynes site. Working capital continues to be tightly managed. The impact of lower receivables, a result of the Glasgow 2014 Commonwealth Games impact on comparatives, has more than offset slightly higher inventories. The Group continues to benefit from strong cash-flow and low leverage. Net debt at 25 July stood at 19.9m, having funded the Funkin acquisition, the Milton Keynes land purchase and the BPR project investment. Free cash flow of 7.4m was generated in the 6 month period. This was 3.8m less than in the comparable period in the prior year, arising from the addition of Funkin, underlying trading performance and slightly higher tax payments. DIVIDEND The Board has declared an interim dividend of 3.36 pence per share, payable on 16 October to shareholders on the register on 2 October. This represents an increase on the prior year of 8.0% and reflects the Board s confidence in the current financial position and the future prospects of the Group. BOARD UPDATE In April, we were very pleased to welcome David Ritchie, CEO of Bovis Homes Group PLC, on to the Board as an independent non-executive director and Chair of the Remuneration Committee. OUTLOOK Having delivered significant internal change over the last our focus is to return the business to sales growth. Market conditions across the first half have been difficult and are forecast to remain so. The business is responding well to the market challenges but the weather since we updated the market in July has been poor and, although we have recovered some sales momentum, it is not yet at the run rate we have targeted. Assuming a satisfactory trading performance in the key Christmas period, the Board now expects the Company to deliver a full year result broadly similar to that achieved last year. A.G. BARR p.l.c. Interim Report 04

7 Interim Statement Despite the specific challenges of the current year, our business is well placed and we remain confident in delivering further on our growth potential and continuing to generate long-term shareholder value. We expect to regain sales momentum and to see the benefits of improved operational execution as we enter John R. Nicolson Chairman 22 September Roger A. White Chief Executive *Adjusted profit is defined as statutory operating profit before interest and tax and after adjusting for discontinued business ( 1.0m), income associated with the 2014 termination of the Orangina franchise ( 0.7m) and one-off transaction fees related to the acquisition of the Funkin Cocktails business ( 0.7m). IRN-BRU becomes Official Soft Drink Partner of The Football League In March IRN-BRU became the Official Soft Drink Partner of The Football League. This new three year partnership provides an exciting opportunity for us to deliver strong brand presence and engagement with millions of consumers as well as the 15 million fans who attend the 1,600 matches each season across England. With an established and successful football sponsorship agreement already in place with the Scottish Professional Football League (SPFL), this new deal enhances our sports sponsorship strength, giving us national reach across 114 different football communities. Carton capability installed at Milton Keynes site The first half of has seen further investment in our flagship site at Milton Keynes with the installation of new carton filling capability. Fully operational since May, the new high speed production lines produce 1 litre and 288ml cartons across our Rubicon, KA and Sun Exotic brands. This significant investment drives much greater operational efficiency, with cartons produced at high speed and much closer to our growing consumer base, as well as providing additional capacity to support future growth. 05 A.G. BARR p.l.c. Interim Report

8 Consolidated Condensed Income Statement Note 25 July 27 July 2014 Total Before exceptional items Restated (note 3(c)) Exceptional items (note 8) Total Restated (note 3(c)) Revenue 6 130, , ,703 Cost of sales (69,068) (74,362) (2,325) (76,687) Gross profit 6 61,192 61,341 (2,325) 59,016 Other income Operating expenses (43,882) (42,923) (218) (43,141) Operating profit 8 17,310 19,165 (2,543) 16,622 Finance income Finance costs (460) (183) (183) Profit before tax 16,876 19,028 (2,543) 16,485 Income tax expense 9 (3,538) (4,202) 532 (3,670) Profit attributable to equity holders 13,338 14,826 (2,011) 12,815 Earnings per share (p) Basic earnings per share Diluted earnings per share A.G. BARR p.l.c. Interim Report 06

9 Consolidated Condensed Income Statement Note Before exceptional items Restated (note 3(c)) Year 25 January Exceptional items (note 8) Total Restated (note 3(c)) Revenue 6 260, ,895 Cost of sales (140,996) (2,910) (143,906) Gross profit 6 119,899 (2,910) 116,989 Other income Operating expenses (78,513) (376) (78,889) Operating profit 8 42,133 (3,286) 38,847 Finance income Finance costs (322) (322) Profit before tax 41,914 (3,286) 38,628 Income tax expense 9 (9,318) 687 (8,631) Profit attributable to equity holders 32,596 (2,599) 29,997 Earnings per share (p) Basic earnings per share Diluted earnings per share A.G. BARR p.l.c. Interim Report

10 Consolidated Condensed Statement of Comprehensive Income 25 July 27 July 2014 Year 25 January Profit for the period 13,338 12,815 29,997 Other comprehensive income Items that will not be reclassified to profit or loss Remeasurements on defined benefit pension plans (note 19) 4,600 (2,660) (19,770) Deferred tax movements on items taken direct to equity (1,434) 22 2,934 Current tax movements on items taken direct to equity ,121 Items that will be or have been reclassified to profit or loss Effective portion of changes in fair value of cash flow hedges 114 (294) 67 Deferred tax movements on items above (22) 59 (14) Other comprehensive income for the period, net of tax 3,772 (2,329) (15,662) Total comprehensive income attributable to equity holders of the parent 17,110 10,486 14,335 A.G. BARR p.l.c. Interim Report 08

11 Consolidated Condensed Statement of Changes in Equity Share capital Share premium account Share options reserve Cash flow hedge reserve Retained earnings At 25 January 4, ,318 (481) 148, ,537 Profit for the period 13,338 13,338 Other comprehensive income 92 3,680 3,772 Total comprehensive income for the period 92 17,018 17,110 Company shares purchased for use by employee benefit trusts (note 20) (1,976) (1,976) Proceeds on disposal of shares by employee benefit trusts (note 20) 1,305 1,305 Recognition of share-based payment costs Transfer of reserve on share award (262) 262 Deferred tax on items taken direct to reserves (66) (66) Dividends paid (10,402) (10,402) At 25 July 4, ,255 (389) 155, ,773 Total 09 A.G. BARR p.l.c. Interim Report

12 Consolidated Condensed Statement of Changes in Equity Share capital Share premium account Share options reserve Cash flow hedge reserve Retained earnings At 26 January , ,826 (534) 148, ,236 Profit for the period 12,815 12,815 Other comprehensive income (235) (2,094) (2,329) Total comprehensive income for the period (235) 10,721 10,486 Company shares purchased for use by employee benefit trusts (note 20) (1,214) (1,214) Proceeds on disposal of shares by employee benefit trusts (note 20) 1,164 1,164 Recognition of share-based payment costs Transfer of reserve on share award (463) 463 Deferred tax on items taken direct to reserves Dividends paid (9,455) (9,455) At 27 July , ,969 (769) 149, ,823 Total A.G. BARR p.l.c. Interim Report 10

13 Consolidated Condensed Statement of Changes in Equity Share capital Share premium account Share options reserve Cash flow hedge reserve Retained earnings At 26 January , ,826 (534) 148, ,236 Profit for the year 29,997 29,997 Other comprehensive income 53 (15,715) (15,662) Total comprehensive income for the year 53 14,282 14,335 Company shares purchased for use by employee benefit trusts (note 20) (2,310) (2,310) Proceeds on disposal of shares by employee benefit trusts (note 20) 1,301 1,301 Recognition of share-based payment costs Transfer of reserve on share award (534) 534 Deferred tax on items taken direct to reserves Dividends paid (13,051) (13,051) At 25 January 4, ,318 (481) 148, ,537 Total 11 A.G. BARR p.l.c. Interim Report

14 Consolidated Condensed Statement of Financial Position Note As at 25 July As at 27 July 2014 As at 25 January Non-current assets Intangible assets ,266 76,349 80,917 Property, plant and equipment 15 82,090 74,688 79, , , ,580 Current assets Inventories 18,029 16,115 16,761 Trade and other receivables 64,988 74,535 51,899 Derivative financial instruments Cash and cash equivalents 10,583 11,281 25,437 Assets held for sale , ,931 94,163 Total assets 284, , ,743 Current liabilities Loans and other borrowings Trade and other payables 58,371 63,341 51,119 Derivative financial instruments Provisions ,100 1,009 Current tax 2,625 3,172 3,314 61,616 68,527 56,181 Non-current liabilities Loans and other borrowings 18 30,402 14,931 14,944 Derivative financial instruments 16 4, Deferred tax liabilities 11,777 10,854 8,612 Retirement benefit obligations 19 13,758 1,786 18,469 60,437 27,618 42,025 Capital and reserves attributable to equity holders Share capital 4,865 4,865 4,865 Share premium account Share options reserve 2,255 1,969 2,318 Cash flow hedge reserve (389) (769) (481) Retained earnings 155, , , , , ,537 Total equity and liabilities 284, , ,743 A.G. BARR p.l.c. Interim Report 12

15 Consolidated Condensed Cash Flow Statement 25 July 27 July 2014 Year 25 January Operating activities Profit for the period 16,876 16,485 38,628 Adjustments for: Interest receivable (26) (46) (103) Interest payable Depreciation of property, plant and equipment 3,593 3,347 6,739 Impairment of property, plant and equipment 1,365 1,483 Amortisation of intangible assets Share-based payment costs Loss/(gain) on sale of property, plant and equipment 138 (35) (119) Operating cash flows before movements in working capital 21,649 21,895 48,096 Increase in inventories (611) (69) (715) Increase in receivables (11,651) (27,060) (4,424) Increase in payables 4,045 21,730 10,208 Difference between employer pension contributions and amounts recognised in the income statement (379) (963) (1,368) Cash generated by operations 13,053 15,533 51,797 Tax on profit paid (3,689) (3,383) (7,031) Net cash from operating activities 9,364 12,150 44,766 Investing activities Acquisition of subsidiary (net of cash acquired) (15,757) Acquisition of intangible assets (4,757) (2,368) (7,063) Purchase of property, plant and equipment (7,941) (2,198) (11,493) Proceeds on sale of property, plant and equipment Interest received Net cash used in investing activities (28,342) (4,055) (17,911) Financing activities New loans received 47,000 15,000 15,000 Loans repaid (31,500) (15,000) (15,000) Bank arrangement fees paid (55) (80) (80) Purchase of Company shares by employee benefit trusts (1,976) (1,214) (2,310) Proceeds from disposal of Company shares by employee benefit trusts 1,305 1,164 1,301 Dividends paid (10,402) (9,455) (13,051) Interest paid (175) (161) (283) Net cash generated by/(used in) financing activities 4,197 (9,746) (14,423) Net (decrease)/increase in cash and cash equivalents (14,781) (1,651) 12,432 Cash and cash equivalents at beginning of period 25,364 12,932 12,932 Cash and cash equivalents at end of period 10,583 11,281 25, A.G. BARR p.l.c. Interim Report

16 Notes to the Financial Statements 1. GENERAL INFORMATION A.G. BARR p.l.c. ( the Company ) and its subsidiaries (together the Group ) manufacture, distribute and sell soft drinks. The Group has manufacturing sites in the U.K. and sells mainly to customers in the U.K. with some international sales. The Company is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in the U.K. The address of its registered office is A.G. BARR p.l.c., Westfield House, 4 Mollins Road, Cumbernauld, G68 9HD. This consolidated condensed interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act Statutory accounts for the year 25 January were approved by the board of directors on 24 March and delivered to the Registrar of Companies. The comparative figures for the financial year 25 January are an extract of the Company s statutory accounts for that year. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 (2) or (3) of the Companies Act This consolidated condensed interim financial information is unaudited but has been reviewed by the Company s Auditor. 2. BASIS OF PREPARATION This consolidated condensed interim financial information for the six months 25 July has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (previously the Financial Services Authority) and with IAS 34, Interim Financial Reporting as adopted by the European Union. The consolidated condensed interim financial information should be read in conjunction with the annual financial statements for the year 25 January, which have been prepared in accordance with IFRSs as adopted by the European Union. Going concern basis The Group meets its day-to-day working capital requirements through its bank facilities. After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group s forecasts and projections, taking account of reasonable sensitivities, show that the Group should be able to operate within available facilities. The Group therefore continues to adopt the going concern basis in preparing its consolidated condensed interim financial statements. 3. ACCOUNTING POLICIES The accounting policies applied are consistent with those of the annual financial statements for the year 25 January, as described in those annual financial statements except as noted below. Changes in accounting policy and disclosures (a) New and am standards adopted by the Group The following revised IFRSs have been adopted in this consolidated condensed interim financial information. The application of these revised IFRSs has not had any material impact on the amounts reported for the current and prior periods. Annual Improvements Cycle, IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 38 and IAS 24. Amendments to IAS 19 Defined Benefit Plans relating to employee contributions. Annual Improvements Cycle, IFRS 1, IFRS 3, IFRS 13 and IAS 40. A.G. BARR p.l.c. Interim Report 14

17 Notes to the Financial Statements 3. ACCOUNTING POLICIES CONTINUED (b) New standards, amendments and interpretations issued but not effective for the financial year beginning 26 January and not adopted early A number of new standards and amendments to standards and interpretations are effective for future year ends, and have not been applied in preparing these interim financial statements. These standards and amendments are listed in the table below: International Accounting Standards and Interpretations Effective Date IFRS 9 Financial Instruments (as am in 2014) IFRS 9 (2014) supersedes IFRS 9 (2009), IFRS 9 (2010) and IFRS 9 (2013) 1 January 2018 Amendment to IFRS 7 Financial Instruments: Disclosures relating to transition to IFRS 9 (or otherwise when IFRS 9 is first applied) When IFRS 9 is first applied IFRS 14 Regulatory deferral accounts 1 January 2016 Amendments to IAS 39 Financial instruments Continuation of hedge accounting When IFRS 9 is first applied Amendments to IFRS 11 Accounting for acquisitions of Interests in Joint operations 1 January 2016 Amendments to IAS 16 and IAS 38 Clarification of acceptable methods of depreciation and amortisation 1 January 2016 Amendments to IAS 16 and IAS 41 Agriculture: Bearer plants 1 January 2016 IFRS 15 Revenue from contracts with customers 1 January 2018 Amendment to IAS 27 Separate Financial Statements (as am in 2011) relating to reinstating the equity method as an accounting option for investments in in subsidiaries, joint ventures and associates in an entity s separate financial statements 1 January 2016 Amendments resulting from September 2014 Annual Improvements to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IFRS 7 Financial Instruments: Disclosures, IAS 19 Employee Benefits and IAS 34 Interim Financial Reporting 1 January 2016 Amendments to IFRS 10 and IAS 28 clarify that the recognition of the gain or loss on the sale or contribution of assets between an investor and its associate or joint venture depends on whether the assets sold or contributed constitute a business 1 January 2016 Amendments to IFRS 10, IFRS 12 and IAS 28 regarding the application of the consolidation exception 1 January 2016 IAS 1 Presentation of Financial Statements: Amendments resulting from the disclosure initiative 1 January 2016 Management anticipates that the application of the above Standards and Interpretations in future periods will have no material impact on the consolidated financial statements of the Group. 15 A.G. BARR p.l.c. Interim Report

18 Notes to the Financial Statements 3. ACCOUNTING POLICIES CONTINUED (c) Restatement of segment reporting (i) In the segment reporting to 25 January a misstatement has been noted between the gross profit for Carbonates and the Other segments. An element totalling 2.3m of gross profit in relation to Carbonates was reported within the Others segment. This has been restated in the table below. There has been no change to the total reported revenue or gross profit before exceptional items or any other element of the financial statements. (ii) In the six months to 25 July a new enterprise resource planning system was implemented. This implementation included an alignment of the internal management reporting and the statutory reporting. The review concluded that some distribution costs previously recorded within operating expenses would be more appropriately recorded within cost of sales as this reflects more accurately the costs incurred in manufacturing products. This has resulted in a reduction in the gross profit of 3.4m in the year to 25 January and a reduction of 1.8m in the six months to 25 July. Operating expenses have reduced by an equivalent amount in these periods with there being no change to the previously reported operating profit. There has been no impact on any other element of the financial statements. 27 July 2014 Carbonates Still drinks and water Total revenue 102,612 31,638 1, ,703 Gross profit before exceptional items as previously stated 53,189 9, ,174 Reclassification of distribution costs (note ii) (2,515) (1,833) Restated gross profit before exceptional items 50,674 10, ,341 Other Total Year 25 January Carbonates Still drinks and water Total revenue 198,249 58,218 4, ,895 Gross profit before exceptional items as previously stated 102,235 17,349 3, ,313 Restatement of gross profit (note i) 2,342 (2,342) Reclassification of distribution costs (note ii) (4,852) 1, (3,414) Restated gross profit before exceptional items 99,725 18,687 1, ,899 Other Total A.G. BARR p.l.c. Interim Report 16

19 Notes to the Financial Statements 4. PRINCIPAL RISKS AND UNCERTAINTIES The directors consider that the principal risks and uncertainties which could have a material impact on the Group s performance in the remaining 27 weeks of the financial year remain substantially the same as those stated on pages of the Group s annual financial statements as at 25 January, which are available on our website, 5. FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS The Group s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow and fair value interest rate risk and price risk), credit risk and liquidity risk. The condensed interim financial statements should be read in conjunction with the Group s annual financial statements as at 25 January as they do not include all financial risk management information and disclosures contained within the annual financial statements. There have been no changes in the risk management policies since the year end. 6. SEGMENT REPORTING The Group s management committee has been identified as the chief operating decision-maker. The management committee reviews the Group s internal reporting in order to assess performance and allocate resources. The management committee has determined the operating segments based on these reports. The management committee considers the business from a product perspective. This led to the operating segments identified in the table below: there has been no change to the segments during the period (after aggregation). The performance of the operating segments is assessed by reference to their gross profit before exceptional items. Exceptional items are reported separately in note A.G. BARR p.l.c. Interim Report

20 Notes to the Financial Statements 6. SEGMENT REPORTING CONTINUED 25 July Carbonates Still drinks and water Total revenue 96,298 27,563 6, ,260 Gross profit before exceptional items 50,150 8,196 2,846 61,192 Other Total 27 July 2014 Carbonates Still drinks and water Total revenue 102,612 31,638 1, ,703 Gross profit before exceptional items (Restated note 3 (c)) 50,674 10, ,341 Other Total Year 25 January Carbonates Still drinks and water Total revenue 198,249 58,218 4, ,895 Gross profit before exceptional items (Restated note 3(c)) 99,725 18,687 1, ,899 Other Total There are no intersegment sales. All revenue is from external customers. Other segments represent the sale of Funkin cocktail solutions, rental income for vending machines, the sale of ice-cream and other soft drink related items. In the six months to 27 July 2014 this segment also included income from water coolers for the Findlays 19 litre water business. This business was disposed of in the second half of the year to 25 January. The gross profit before exceptional items from the segment reporting is reconciled to the total profit before income tax as shown in the consolidated condensed income statement. All of the assets of the Group are managed by the management committee on a central basis rather than at a segment level. As a result no reconciliation of segment assets and liabilities to the consolidated condensed statement of financial position has been disclosed for any of the periods presented. 7. SEASONALITY OF OPERATIONS Historically, approximately half the revenues and operating profits are expected in each half of the year. A.G. BARR p.l.c. Interim Report 18

21 Notes to the Financial Statements 8. OPERATING PROFIT The following items have been charged to operating profit during the period: 25 July 27 July 2014 Year 25 January Acquisition costs (note 13) 667 Inventory write down Foreign exchange losses recognised ,063 Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completing production and selling expenses. During the six months to 27 July 2014 the contract for the production and selling of Orangina was terminated by the recently formed Lucozade Ribena Suntory Group. This resulted in compensation of 0.7m being received by A.G. BARR p.l.c. This has been shown on the consolidated condensed income statement as other income. The following exceptional items have been charged or credited before operating profit: 25 July 27 July 2014 Year 25 January Redundancy costs relating to the closure of the Tredegar manufacturing site 960 1,427 Impairment charges relating to the closure of the Tredegar manufacturing site 1,365 1,483 Total cost of sales 2,325 2,910 Pension curtailment (523) (523) Redundancy costs for finance, telesales, distribution, demand and supply planning reorganisation Total operating costs Total exceptional costs 2,543 3,286 During the six months to 27 July 2014 A.G. BARR p.l.c. announced the closure of its manufacturing site at Tredegar. This resulted in an impairment charge of 1.4m in respect of buildings and plant at the site with a further 0.1m charge in the second half of the year 25 January. 3,000 of redundancy related costs were incurred in the six months to 27 July 2014 with a further 1.0m of redundancy costs provided for. A further 0.5m was incurred in the second half of the year to 25 January. 19 A.G. BARR p.l.c. Interim Report

22 Notes to the Financial Statements 8. OPERATING PROFIT CONTINUED Redundancy, recruitment and training costs in relation to the finance, telesales, distribution, demand and supply planning operations within England were incurred during the six months to 27 July 2014 and year 25 January and treated as exceptional. As a result of the finance, telesales, distribution, demand and supply planning reorganisation, a curtailment in the Group s retirement pension plan arose in the 27 July 2014 and year 25 January. This resulted in an exceptional credit arising from the reduction in the retirement benefit obligation following a reduction in the number of employees remaining with the scheme. The value of this credit was 0.5m. 9. TAX ON PROFIT The interim period tax charge is accrued based on the estimated average annual effective income tax rate of 21.0% (six months 27 July 2014: 22.3%; year 25 January : 22.3%). The Chancellor announced in his Summer Budget on 8 July that the main rate of corporation tax will be reduced to 19% from 1 April 2017 and 18% from 1 April 2020 and the future current tax charges will reduce accordingly. These changes are contained in the Finance Bill which is not expected to be substantively enacted until October and at that point the changes will be reflected in the Company s deferred tax liabilities. 10. EARNINGS PER SHARE Basic earnings per share have been calculated by dividing the earnings attributable to equity holders of the parent by the weighted average number of shares in issue during the year, excluding shares held by the employee share scheme trusts. 25 July 27 July 2014 Year 25 January Profit attributable to equity holders of the Company () 13,338 12,815 29,997 Weighted average number of ordinary shares in issue 115,280, ,516, ,377,541 Basic earnings per share (pence) For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company s ordinary shares during the period. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. A.G. BARR p.l.c. Interim Report 20

23 Notes to the Financial Statements 10. EARNINGS PER SHARE CONTINUED 25 July 27 July 2014 Year 25 January Profit attributable to equity holders of the Company () 13,338 12,815 29,997 Weighted average number of ordinary shares in issue 115,280, ,516, ,377,541 Adjustment for dilutive effect of share options 676, , ,962 Diluted weighted average number of ordinary shares in issue 115,957, ,139, ,001,503 Diluted earnings per share (pence) The underlying EPS figure is calculated by using profit attributable to equity holders before exceptional items: 25 July 27 July 2014 Year 25 January Profit attributable to equity holders of the Company before exceptional items () 13,338 14,826 32,596 Weighted average number of ordinary shares in issue 115,280, ,516, ,377,541 Underlying earnings per share (pence) This measure has been included in the financial statements as it provides a closer guide to the underlying financial performance as the calculation excludes the effect of exceptional items. 11. DIVIDENDS PAID 25 July per share (p) 27 July 2014 per share (p) Year 25 January per share (p) 25 July 27 July 2014 Year 25 January Paid final dividend ,402 Paid first interim dividend ,596 Paid second interim dividend ,455 9, ,402 9,455 13,051 An interim dividend of 3.36p (an increase of 8% on last year) per share was approved by the board on 22 September and will be paid on 16 October to shareholders on record as at 2 October. 21 A.G. BARR p.l.c. Interim Report

24 Notes to the Financial Statements 12. HELD FOR SALE ASSETS The property, plant and equipment related to the manufacturing site at Tredegar have been presented as held for sale following the decision to close the site. The property, plant and equipment was sold during September (note 22). 13. ACQUISITION OF SUBSIDIARY On 2 February, the Group acquired 100% of the share capital of Funkin Limited ( Funkin ), a company which offers a broad range of premium cocktail solutions including fruit purées, cocktail mixers and syrups. In the six months to 25 July, Funkin contributed revenue of 4.9m and an operating profit of 0.7m to the Group s results. Had Funkin been consolidated from 26 January, the consolidated condensed income statement for the six months 25 July would not be materially different. Consideration transferred The following table summarises the acquisition-date fair value of each major class of consideration transferred: Cash 17,511 Contingent consideration 4,500 Total consideration 22,011 Contingent consideration The Group has agreed to pay the former owners of Funkin a contingent consideration based on achievement of certain financial targets by Funkin in the two years from the date of its acquisition by the Group. The potential undiscounted amount of all future payments that the Group could make under the acquisition agreement is between nil and 4.5m. The fair value of the contingent consideration arrangement of 4.5m was estimated by assessing the expected growth of Funkin over the two years trading post acquisition. No discount rate has been applied to the fair value estimate of the contingent consideration as due to the short time period the effect of discounting has a negligible effect on the fair value. The fair value of trade and other receivables is 1.4m and includes trade receivables with a fair value of 1.2m. The gross contractual amount for trade receivables due is 1.3m of which 0.1m is expected to be uncollectible. The fair value of the acquired identifiable intangible assets of 7.2m, is provisional pending receipt of the final valuations for those assets. A deferred tax liability of 1.5m has been provided in relation to these fair value adjustments in relation to intangible assets. Acquisition-related costs The Group incurred acquisition-related costs of 0.7m relating to external legal fees and due diligence costs. These costs have been included in operating costs in the consolidated condensed income statement. A.G. BARR p.l.c. Interim Report 22

25 Notes to the Financial Statements 13. ACQUISITION OF SUBSIDIARY CONTINUED Recognised amounts of identifiable assets acquired and liabilities assumed Cash and cash equivalents 1,754 Funkin brand 6,800 Customer list 414 Property, plant and equipment 13 Inventories 657 Trade and other receivables 1,438 Trade and other payables (3,167) Current tax liability (149) Deferred tax liabilities (1,470) Total identifiable net assets 6,290 Goodwill 15,721 None of the goodwill arising on the acquisition is expected to be deductible for tax purposes. The goodwill of 15.7m arises from a number of factors including expected synergies through combining an experienced senior team and obtaining greater production efficiencies through knowledge transfer; marketing expertise; obtaining economies of scale by cost reductions from purchasing efficiencies; price reductions and greater volume rebates from suppliers; sales synergies arising from introducing Funkin to A.G. BARR s route to market and sales channels; and unrecognised assets such as the workforce. 14. INTANGIBLE ASSETS 25 July 27 July 2014 Year 25 January Opening net book value 80,917 74,107 74,107 Additions 27,692 2,368 7,063 Amortisation (343) (126) (253) Closing net book value 108,266 76,349 80,917 The additions for periods presented represent goodwill and other intangible assets acquired as part of the acquisition of Funkin (note 13), internally generated software development costs and third party consultancy costs incurred in relation to the Business Process Redesign project. 23 A.G. BARR p.l.c. Interim Report

26 Notes to the Financial Statements 14. INTANGIBLE ASSETS CONTINUED The amortisation charge for the six months to 25 July represents 0.2m (six months 27 July 2014: nil; year 25 January : nil) of charges in relation to the Business Process Redesign project, 0.1m (six months 27 July 2014: 0.1m; year 25 January : 0.3m) of charges for the Rubicon customer list and 34,000 of charges for the Funkin customer list. 15. PROPERTY, PLANT AND EQUIPMENT 25 July 27 July 2014 Year 25 January Opening net book value 79,663 76,314 76,314 Additions 7,082 3,538 12,037 Additions acquired during acquisition (note 13) 13 Disposals (225) (452) (466) Property, plant and equipment classified as held for sale (note 12) (850) Impairment of property, plant and equipment (1,365) (1,483) Depreciation (3,593) (3,347) (6,739) Closing net book value 82,090 74,688 79,663 The closing balance includes 0.6m (as at 27 July 2014: 2.5m; as at 25 January : 6.7m) of assets under construction. 16. FINANCIAL INSTRUMENTS Current assets of 20,000 (at 27 July 2014: nil; 25 January : 0.1m) relate to forward foreign currency contracts with a maturity of less than 12 months and are classified as fair value through the cash flow hedge reserve. Current liabilities of 0.5m (at 27 July 2014: 0.9m; 25 January : 0.7m) represents forward foreign currency contracts with a maturity of less than 12 months and are classified as fair value through the cash flow hedge reserve. Non-current liabilities of nil (at 27 July 2014: 47,000; 25 January : nil) relate to forward foreign currency contracts with a maturity of more than 12 months and are classified as fair value through the cash flow hedge reserve. A.G. BARR p.l.c. Interim Report 24

27 Notes to the Financial Statements 16. FINANCIAL INSTRUMENTS CONTINUED Fair value hierarchy IFRS 7 requires all financial instruments carried at fair value to be analysed under the following levels: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) Level 3: inputs for the asset or liability that are not based on observable market data The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. The fair value of the forward foreign exchange contracts is determined using forward exchange rates at the date of the statement of financial position, with the resulting value discounted accordingly as relevant. All financial instruments carried at fair value are Level 2. Fair values of financial assets and financial liabilities The table below sets out the comparison between the carrying amount and fair value of all of the Group s financial instruments, with the exception of trade and other receivables and trade and other payables. Fair value hedging instruments Carrying amount Loans and receivables Other financial liabilities at amortised cost Total Fair value Level 2 As at 25 July Financial assets not measured at fair value Cash and cash equivalents 10,583 10,583 10,583 10,583 10,583 10,583 Financial assets measured at fair value Foreign exchange contracts used for hedging current Financial liabilities measured at fair value Foreign exchange contracts used for hedging current Contingent consideration 4,500 4,500 4, ,500 5,008 5,008 Financial liabilities not measured at fair value Unsecured bank borrowings non-current 30,500 30,500 30,402 30,500 30,500 30, A.G. BARR p.l.c. Interim Report

28 Notes to the Financial Statements 16. FINANCIAL INSTRUMENTS CONTINUED Fair values of financial assets and financial liabilities continued Fair value hedging instruments Carrying amount Loans and receivables Other financial liabilities at amortised cost Total Fair value Level 2 As at 27 July 2014 Financial assets not measured at fair value Cash and cash equivalents 11,281 11,281 11,281 11,281 11,281 11,281 Financial liabilities measured at fair value Foreign exchange contracts used for hedging current Foreign exchange contracts used for hedging non-current Financial liabilities not measured at fair value Unsecured bank borrowings non-current 14,931 14,931 14,931 Fair value hedging instruments 14,931 14,931 14,931 Carrying amount Loans and receivables Other financial liabilities at amortised cost Total Fair value Level 2 As at 25 January Financial assets not measured at fair value Foreign exchange contracts used for hedging Cash and cash equivalents 25,437 25,437 25, ,437 25,503 25,503 Financial liabilities measured at fair value Foreign exchange contracts used for hedging Financial liabilities not measured at fair value Unsecured bank borrowings current Unsecured bank borrowings non-current 14,944 14,944 14,944 15,017 15,017 15,017 A.G. BARR p.l.c. Interim Report 26

29 Notes to the Financial Statements 16. FINANCIAL INSTRUMENTS CONTINUED Fair values of financial assets and financial liabilities continued The carrying value of non-current borrowings is disclosed before the deduction of the unamortised arrangement fee of 0.1m. The fair values of the non-current borrowings are based on cash flows discounted using the current variable interest rate charged on the borrowings of 1.50% and a discount rate of 1.50%. 17. PROVISIONS 25 July 27 July 2014 Year 25 January Opening provision 1, Provision created in the period 1,469 1,469 Provision released during the period (36) (97) Provision utilised during the period (897) (729) (759) Closing provision 112 1,100 1, BORROWINGS AND LOANS Movements in borrowings are analysed as follows: 25 July 27 July 2014 Year 25 January Opening loan balance 15,073 15,000 15,000 Borrowings made 47,000 15,000 15,000 Bank overdrafts 73 Repayments of borrowings and overdrafts (31,573) (15,000) (15,000) Closing loan balance before arrangement fees 30,500 15,000 15,073 Unamortised arrangement fee (98) (69) (56) Closing loan balance 30,402 14,931 15,017 The reconciliation to net debt is as follows: As at 25 July As at 27 July 2014 As at 25 January Closing loan balance before arrangement fees 30,500 15,000 15,073 Cash and cash equivalents (10,583) (11,281) (25,437) Net debt 19,917 3,719 (10,364) 27 A.G. BARR p.l.c. Interim Report

30 Notes to the Financial Statements 18. BORROWINGS AND LOANS CONTINUED The undrawn facilities at 25 July are as follows: Total facility Drawn Undrawn Revolving credit facilities 45,000 30,500 14,500 Overdraft 5,000 5,000 50,000 30,500 19,500 During the six months to 25 July, the Group renegotiated a 35m revolving credit facility. A total arrangement fee of 0.1m was incurred and will be amortised over the life of the loan facility. The revolving credit facility will expire in January A further 10m revolving credit facility was arranged in the year to 26 January 2014 and will expire in March The directors confirm that the Group has sufficient headroom to enable it to meet the covenants on its existing borrowings. There are sufficient working capital and undrawn funding facilities available to meet the Group s ongoing requirements. 19. RETIREMENT BENEFIT OBLIGATIONS The defined retirement benefit scheme had a deficit of 13.8m as at 25 July. The reconciliation of the closing deficit is as follows: 25 July 27 July 2014 Year 25 January Closing present value of obligation (122,143) (102,025) (131,005) Closing fair value of plan assets 108, , ,536 Closing net deficit (13,758) (1,786) (18,469) The key financial assumptions used to value the liabilities were as follows: As at 25 July % As at 27 July 2014 % As at 25 January % Discount rate Future salary increases Inflation assumption A.G. BARR p.l.c. Interim Report 28

31 Notes to the Financial Statements 20. MOVEMENTS IN OWN SHARES HELD BY EMPLOYEE BENEFIT TRUSTS During the six months to 25 July the employee benefit trusts of the Group acquired 321,789 (six months to 27 July 2014: 196,769; year to 25 January : 383,790) of the Company s shares. The total amount paid to acquire the shares has been deducted from shareholders equity and is included within retained earnings. At 25 July the shares held by the Company s employee benefit trusts represented 1,366,277 (27 July 2014: 1,220,454; 25 January : 1,350,184) shares at a purchased cost of 8.6m (27 July 2014: 6.7m; 25 January : 7.5m). 305,696 (six months to 27 July 2014: 288,633; year to 25 January : 345,924) shares were utilised in satisfying share options from the Company s employee share schemes during the same period. The related weighted average share price at the time of exercise for the six months to 25 July was 6.18 (six months to 27 July 2014: 6.27; year to 25 January : 6.12) per share. 21. CONTINGENCIES AND COMMITMENTS As at 25 July As at 27 July 2014 As at 25 January Commitments for the acquisition of property, plant and equipment 6,444 1,170 1, EVENTS OCCURRING AFTER THE REPORTING PERIOD Interim dividend As disclosed in note 11, an interim dividend of 3.36p per share will be paid to shareholders on 16 October. The closure of the manufacturing site at Tredegar was disclosed in the Annual Report and Accounts for the year 25 January. The site was closed during the six months to 25 July and the related property, plant and equipment was sold in September. 23. RELATED PARTY TRANSACTIONS There have been no related party transactions in the first 26 weeks of the current financial year which have materially affected the financial position or performance of the Group. With the exception of Funkin, which was acquired on 2 February (note 13), related parties and transactions with them over the six months to 25 July are consistent with those disclosed in the Group s Annual Report and Accounts for the year 25 January. 29 A.G. BARR p.l.c. Interim Report